Cinedigm Corp.
Q3 2015 Earnings Call Transcript

Published: 13 Feb 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Cinedigm Corp. Fiscal 2015 Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Jill Newhouse, Executive Vice President, Corporate Communications.

[Jill Newhouse Calcaterra:]

Thank you. Good afternoon, and thank you for joining today's Third Quarter Fiscal 2015 Earnings Conference Call. Participating in today's call are Cinedigm's Chairman and Chief Executive Officer, Chris McGurk; Chief Operating Officer, Adam Mizel; and our Chief Financial Officer, Jeffrey Edell. Before I hand the call over to management, please note that on this call certain information presented contains forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from these forward-looking statements are described in the company's periodic reports filed with the SEC from time to time. All of the information discussed on this call is as of today, February 12, 2015, and Cinedigm does not intend and undertakes no duty to update future events or circumstances. In addition, certain of the financial information presented in this call represents non-GAAP financial measures. And now I'd like to turn the call over to Chris McGurk.

[Christopher J. McGurk:]

Thanks, Jill, and thanks, everyone, for joining us today. I'll start by reviewing the solid progress we've made in our base distribution business and also outline the new and positive developments in our high-potential OTT digital network business. After that, Adam will review Cinedigm's OTT channels and our base business in more depth, followed by Jeff, who will review our financial results. We are pleased with this quarter's operating and financial results, which underscore the continued momentum in our base business that began with last quarter's strong performance. Our OTT business continues to rapidly move ahead, with ConTV launching March 3, Docurama hitting over 300,000 app downloads and our faith and family Dove entertainment channel now being prepped for launch in summer of 2015. This week, we also announced an OTT partnership with TV4 Entertainment that could potentially result in several new niche OTT channels and the planned launch of the new BRIGHT Edutainment OTT channel. Both of these new initiatives further demonstrate our strategy to create a diversified portfolio of digital networks that leverage the unique asset Cinedigm brings to the high-margin, high-growth OTT digital networks business. At the same time, we continue to fill our sales pipeline with distribution deals that will provide a high volume of original cast-driven films that can be leveraged across all our platforms, from theatrical to digital to the emerging OTT channels. Our strategic pivot from distributed catalog deals to these higher potential film distribution deals continues to address a portion of the performance issues we inherited when we acquired Gaiam Entertainment or GVE. In the last 12 months, we've signed new distribution deals that will bring us all domestic distribution rights for 74 new original cast-driven and genre films, rapidly filling the release pipeline and providing a strong flow of new content to all of our platforms while also helping us quickly build our OTT business. Partners in these productions include such well-known producers as The Asylum; American International Pictures, or AIP; Great Point Media, Brand Entertainment; Moguldom; and many more. I'd like to spend a moment describing the innovative AIP film distribution deal, because it underscores the unique position our company occupies as the strongest independent distributor of content in all media, as well as a leader in the OTT business and the strategic synergies that exist between those businesses. AIP produced and controls a library of 1950s B movies like Girls in Prison, Brain Eaters and The Undead. These films are cult classics for the millennials fan boy and fan girl audience, our target demo for ConTV and the biggest entertainment consumers on the planet. We acquired all domestic rights to 10 full-length reimagined classic cult AIP films that will be shot back-to-back with storylines and characters all melded into one epic arch across all the films. This first of its kind distribution arrangement will allow today's binge viewing fans to watch these films contiguously. We will also have an exclusive release window and extensive promotional footprint for the films at the Comic Cons and on ConTV, where we are also considering a recurring AIP film series television program, bringing fans to the production set to view talent interviews and updates, building interest and enthusiasm in advance of the movies' premieres. This initiative is particularly compelling, because it underscores how Cinedigm's strong distribution capabilities mutually reinforce with our new OTT channels like ConTV cannot only attract new premium franchise content to Cinedigm, but also allows us to break the mold by releasing a hybrid format viewing experience to avid consumers. Expect more innovative initiatives like this in the future. Now let me address the rapidly emerging OTT business. As we've shared on our last few calls, the enormous potential of this new digital delivery ecosystem is being validated almost daily by new OTT announcements, including entertainment giants like Nickelodeon, CBS, HBO, and Sling initiative that will bring a variety of channels, including ESPN, over-the-top to consumers. Clearly, the future is all about making programming available to consumers when and where they want to see it on the device of their choice. And that's exactly what makes OTT distribution such a game changer for the entire business, and specifically for Cinedigm with our vast library of film and TV episodes, great digital relationships with every platform and with no traditional legacy channels or archaic windowing strategies to burden our flexibility, unlike almost all of the larger entertainment companies. And it's important to note that we are not directly competing with these broadly-focused general entertainment OTT channels like HBO or Netflix or CBS. Rather, our objective is to build narrowcast versions of a Hulu or a Netflix or an Amazon by delivering specific content to avid, well-defined audiences in partnership with key brands that have direct access to customers. And the enormous value of this new digital delivery ecosystem is clearly evident in the industry. The recent transactions, including the acquisition of multichannel networks Fullscreen and Rooster Teeth and the investment by Hearst in DreamWorks's Awesomeness TV, all at very high valuations have underscored that OTT is the biggest future growth opportunity for the entertainment business. With our huge library of premium content rights and digital expertise as key assets, Cinedigm's recipe for OTT success in the new digital ecosystem is clear. Content will remain king, strong authentic brands will dominate and speed and quality of execution will be critical. Docurama, ConTV, the Dove Entertainment Channel and the TV4 and BRIGHT initiatives all fit that strategy. Our vision is to build and successfully launch a diversified portfolio of these narrowcast OTT channels in the next couple of years, all generating significant advertising and merchandising revenues in addition to recurring subscription fees from hundreds of thousands of subscribers for each channel. In aggregate, we expect this business to generate 40% plus operating margins for us. And with these new initiatives in place and the momentum continuing in our base business, we are optimistic about the future. Now Adam will share more details about our business. Adam?

[Adam M. Mizel:]

Thank you, Chris. Now that Chris has outlined our OTT business strategy, I will provide more details on our channels as well as progress in our base business. Let's start with Docudrama, our in-house brand and the first channel we've launched as a beta test. Currently, Docurama has approximately 300,000 advertising VOD app installs across multiple platforms and we are adding approximately 8,000 installs each week. We have achieved this with a very minimal marketing spend. From a low base last quarter, we almost doubled ad impressions this quarter at an average $19 CPM. As we scale up ConTV, we will further integrate and leverage our growing ad placement infrastructure. We're also continually improving the user experience that the channel now has for instance a 5-star rating on iOS. We continue to learn from Docurama and operate it as a beta test until we convert it to our freemium AVOD SVOD model later this year in combination with a branded partner. The Dove Entertainment Channel is set to go live this summer by a partnership with The Dove Foundation. Targeted to consumers seeking high-quality, family-friendly and faith-based content, we are purposely targeting our acquisitions team for our distribution deals like our recent Chesler/Perlmutter and Brand Entertainment film slates that should provide a steady stream of premium content for the Dove channel as well as for our base business. When we launch Dove, we will leverage the same technology infrastructure we used for ConTV, so we expect to move quickly and at a low cost to customize the service. We are excited about our recently announced partnership with BRIGHT Educational Media to launch BRIGHT, a multiplatform digital channel featuring edutainment for kids. This OTT offering targeted to young children and their families will focus on live action, education and learning-based programming and will include significant premium content from Cinedigm's library. We look forward to working with the BRIGHT management team, which includes the founding partner of MAVTV, a successful family-oriented cable network, currently available in 28 million homes and executives with significant experience at Showtime networks. Together, we plan to combine BRIGHT's strong relationships with traditional MSOs and cable operators with Cinedigm's solid new media digital and OTT relationships to create an even broader platform for BRIGHT potentially an avenue for our other OTT channels as well. Our other significant new initiative with TV4 Entertainment also reinforces our goal of having a diversified and risk-advantaged portfolio of digital networks. This partnership will mine our library to program several new niche OTT channels that will be distributed through TV4's entertainment premium online video distribution platform, covering 100 million U.S. households and over 300 million devices. We are particularly excited that the TV4 model will allow us to launch channels quickly and with minimal investment risk. Based on launch results, we then have the opportunity to apply additional Cinedigm resources to accelerate the reach and growth of these niche channels. We expect the first channel to launch this summer. And finally, we are launching ConTV in partnership with Wizard World Comic Con on March 3. ConTV will launch as one of the largest OTT channels available in terms of hours of content on the service and a freemium model with both SVOD and AVOD options. We will have nearly 1,500 hours of content at launch and we'll strategically premier 4 new original programs and many hours of Comic Con panels, CausePlay contest and other behind-the-scenes footage direct from Wizard World Comic Cons in the months ahead. Enthusiasm within the Comic Con community is building as we've begun premarketing the service. We will initially focus our marketing efforts on the hundreds of thousands of customers that attend Wizard World Comic Con annually, as well as Wizard World's enormous e-mail database and Social Media following. We will be on the ground at all upcoming Wizard World Comic Cons during the busy spring and summer season, demonstrating the service, activating customers and producing new original programming. We will be seeking fan input to continually improve the channel, ensure we are providing content that speaks to those fans. We will accelerate our advertising plans around the big May Wizard World Comic Cons in Philadelphia, St. Louis and Minneapolis and in particular around San Diego in July. We sincerely hope that all of you on this call will become SVOD customers at $6.99 per month. Finally, our base entertainment business continued the rebound that began last quarter. We benefited from a well-received content slate and strong physical displacement and sell-through at our main retail partners during the holiday season, as well as continued growth in digital licensing revenues in the quarter. In the last 90 days, we have added 5 more significant coproduction partnerships and additional 5 oneoff movie pickups to bolster our near-term release calendar. On the theatrical front, subsequent to quarter end, we released Song One, starring Anne Hathaway. To capitalize on the huge PR response and interest we've received in Anne and the movie, we released the film on video-on-demand the same date it was in theaters. Although the film continues to be available, the preliminary results have been solid, with the film reaching #2 on iTunes top romance chart and reaching #3 on iTunes Indie film chart. We expect our production partners to bring us more opportunities like Song One that involves top talent and marketable films that we can release in the same risk advantaged manner. And now I'll turn the call to Jeff to review the quarter's financial results.

[Jeffrey S. Edell:]

Thank you, Adam. We're pleased with our results this quarter, which exceeded the positive signs we saw at the time of our last call. Consolidated revenues were at $31.3 million compared to $23.7 million in the second quarter and $34.9 million in the prior year quarter. Phase 1 and Phase 2 deployment revenues, which are not controllable by Cinedigm, decreased by 5% for the 3 months ended December 31, 2014, as virtual print fees were impacted by a reduced release calendar. Our entertainment business continued to show the renewed momentum that started last quarter due to strong titles and holiday sales, with revenues increasing to $16.2 million, a nearly 79% increase from the $9 million in the second quarter. However, the significant new film distribution deals and other new business signed by Cinedigm this year that Adam referred to will not contribute to our results until fiscal year '16 and did not offset the industry-wide decline in physical sales and the underperforming customer contracts inherited from GVE, like the WWE, with whom we are now no longer working. The company reported consolidated adjusted EBITDA of $15.7 million compared to $12.4 million in the second quarter and $17.7 million in the prior year quarter. Despite the GVE headwinds and our investment in the OTT ramp-up, adjusted EBITDA from the nondeployment business was $3.7 million compared to $1.2 million in the second quarter and $5.6 million in the prior year quarter. It's interesting to note that according to our recent Nielsen videos scan report, physical sales of independent product are declining at a rate of 15% over the past year. However, Cinedigm's results reflect only a 9% decline on a net dollar basis during that same period. Additionally, during the quarter, the company paid down $14.5 million of nonrecourse and corporate debt, bringing the total debt paid down during the first 9 months of the fiscal year to $43.6 million. Our next quarter is seasonally slow, and we will be launching ConTV and investing in our other OTT channels. Despite the near-term pressure on our financial results, the company's momentum in our base entertainment business, refilled release pipeline in emerging OTT channel portfolio, we are all very encouraging for the future. Now I'll turn the call back over to Chris.

[Christopher J. McGurk:]

Thanks, Jeff, and thanks, Adam. In summary, we are pleased with our performance this quarter and our success in filling the release pipeline with strong content and innovative programming like the AIP deal I described earlier. It will also help accelerate the growth of our OTT business. We are focused on the successful launch of ConTV on March 3, prepping for the Dove Entertainment Channel launch this summer and moving forward with our recently announced OTT partnerships with TV4 Entertainment and BRIGHT media. Our plan to create a diversified portfolio of digital networks, launching several narrowcast channels, each with a customized business model that maximizes the potential for success, is quickly coming to fruition. Together with our digital cinema business, which continues to generate strong recurring revenues and rapidly pay down its nonrecourse debt, Cinedigm is now positioned strategically as the only small-cap public entertainment company poised to take full advantage of the valuation upside potential from the industry shift to digital. From a shareholder perspective, we believe, as our OTT channels scale, we can deliver rapid growth and significant higher margin recurring revenues and profits at a relatively low level of investment and risk. As a reminder, management and the board own over 25% of Cinedigm's outstanding equity, including options and warrants on a fully diluted basis. So you can be assured our interests are aligned with our shareholders. And now we're happy to answer any questions you might have.

[Operator:]

[Operator Instructions] The first question is from James Marsh of Piper Jaffray.

[James M. Marsh:]

Just a couple of quick ones for you, guys. First of all, Chris, you're talking about on the direct to consumer channels potentially getting to 40% operating margins. I was just wondering, what's the timetable for that? I mean, how long do you think these channels will take to get to maturity? Or do you think just the way you guys are structuring them, it should kind of ramp-up pretty quickly to those types of margins? The second question just relates to the Anne Hathaway movie you're talking about and how you guys seem to be able to go day-and-date with VOD releases? It seems like the rest of the industry struggles to do that and exhibitors seem to stop them from doing. I was just wondering how you guys kind of manage that. And then just the last question just relates to the loss with Gaiam. For those of us that aren't attorneys, can you just kind of remind us what the steps are there and what that timetable might look like?

[Christopher J. McGurk:]

Yes. This is Chris, why don't I answer your last 2 questions first, then I'll turn the first one over to Adam. In regard to Gaiam, as we've said before, it's our policy not to get into specifics on an ongoing legal matter. But I will say, we did a court filing today, and that court filing is a step in the process of compelling Gaiam to move forward with our arbitration of the dispute. And we're making a detailed disclosure about this in our Form 10-Q, which is being filed this afternoon. So you'll be able to fully see the status and our position on this case and the court filing and in the 10-Q. I'll just say that, obviously, we are disappointed at this point that we have to resort to the courts to resolve the dispute, but Gaiam really gave us little choice. But we're very confident in the merits of our case and that we're going to prevail in the matter. So that was to your last question. Your second question was about Song One and Anne Hathaway and how we're able to take a movie out day-and-date. And I think a couple of reasons. First, we're not in the wide release business like the other studios. We don't have a wide release business to protect. We're a limited release studio. We generally will never take a film out at more than 250 screens, and that gives us a real advantage in releasing a movie into day-and-date VOD, where we really only need a platform of 20 to 50 films in 10-plus markets in order to do a viable theatrical release. And I think it also helps that we've been very carefully picking projects with talent who are willing to go day-and-date VOD. And obviously, some of the major stars that the studios are dealing with are still focused on theatrical as the primary release market, which makes it difficult for them to do a day-and-date release. Some of them like Anne Hathaway, who kind of gets where the industry is going, with the proliferation of digital technology and the fact that audiences want to view content now, not the way Hollywood wants them to view it, but the way they want to view it, on the device of their choice, at the time of their choice, someone like Anne Hathaway who gets that, and says you know what, my goal is really to get access to as many eyeballs as I can possibly get, whether that's on an iPad or in a theater or on somebody's computer on VOD, they're willing to work with us and promote a day-and-date release plan and she did a fantastic job on this. And so we're being very careful going forward to try to pick the talent that are kind of forward-looking and are accepting of that kind of release pattern. So those were your last 2 questions, I'll turn the first one over to Adam.

[Adam M. Mizel:]

James, and then as we think about the scaling and the margins on any of our channels, I think we look at as an individual channel basis. It will take somewhere from 12 to 24 months to scale to the 40-plus percent operating margin. And at that point, along that curve, the decision is how much are you investing of your profits in future customer acquisition? And the same choice that I think you see in Netflix or an Amazon or a Hulu or anyone else making as a scale on online business. And so the real question if we see a lot of customers and a lot of interest, we're going to continue to spend on acquiring them to create that long-term lifetime value. If we feel that we can slow that growth curve and layer on other channel on top of that, you get the higher-margin sooner. So we really have to judge that in the development of each channel.

[Operator:]

The next question is from Eric Wold of B. Riley.

[Eric C. Wold:]

A couple of questions on the OTT channel launches. Can you give us a sense, Jeff, how much was spent in the quarter on kind of the platform build and the prep launch for the channels? Trying to get a sense of kind of what the drag was on EBITDA and kind of what that could look like in the March quarter?

[Christopher J. McGurk:]

Go ahead, Jeff.

[Jeffrey S. Edell:]

Yes. So we don't really disclose specific investments in any of the businesses, as you know, and OTT is not very different than that. We can tell you though that there was a significant amount of dollars that are already reflected in that $3.7 million of EBITDA that I reported that are for the OTT release. And our estimate is as the infrastructure enables the OTT channels, they save generally between $4 million and $8 million of hard launch costs, because we have that infrastructure in place here. So you can kind of put some numbers together maybe in your head, but, again, we don't release any specific investment dollars numbers.

[Eric C. Wold:]

Okay. And then on the launch of ConTV, maybe a little more detail, where you can say into how that will be marketed, promoted around the conventions? It's going to be something where a trial comes with each ticket purchased, a trial or somehow it's required to download the app to get into the convention? Just how -- forceful, I mean, but how do you really want to penetrate that avid fan base without just normal marketing, kind of make it more of a forced decision?

[Adam M. Mizel:]

Yes, yes. A couple of things. Initially, with any ticket purchase, there's an option in upgrading to a ConTV package where you can, at a discounted rate, buy a subscription. Number two, everyone will be getting the app as part of to download as an option as part of buying a ticket. And then number three, we will have massive amounts of on the floor between booths, people walking around with iPads, activating subscribers, every panel is going to start with a ConTV, so there is -- so there'll be a lot of marketing and follow-up of people, signing people up, while they're waiting in line for hours to get an autograph of X or Y or Z. So all of those will happen. Over time, we will integrate fully more the ticketing in that billing, but that just takes a little longer because Wizard World's ticketing system is built to sell a ticket to a Con, not to sell a recurring revenue content membership, and that's just the different system and that's going to take a little bit of time to build. As that gets built out, there'll be further integration, but upfront I think we think we can get a lot of it done through the linkages of the ticket purchase and through people on the ground and through Social Media and e-mail follow-up and a whole host of other things.

[Eric C. Wold:]

Perfect. And then final question, as you think about Con and Dove and other channels kind of in development, do you have kind of in mind how should we think about with each channel what the average amount of kind of proprietary content will be? I think obviously a big driver of Netflix and others has been their ability to have proprietary content and kind of homegrown content. How much of what you'll have on each channel on average will be proprietary, not able to find anywhere else?

[Christopher J. McGurk:]

Well, I think -- that's a good question. It's going to vary by channel. But in the case of ConTV, with the 1,500 hours of programming that we're launching that with, about 60% of the content is going to be Cinedigm library content that you can find elsewhere. About 40% of the content will be original programming and shows and series and interviews and panels and guest appearances from the Cons. So there's about 40% of the program that you won't be able to get elsewhere on ConTV. And that's not going to be a model exactly going forward because, again, it's going to depend on the way each channel is programmed and curated. But I think that gives you a sense from the first channel that we are launching.

[Adam M. Mizel:]

And Eric Wold, I'll add to that would also be, even the content, whether on ConTV or ultimately on Dove or other channels that we're putting there, though not proprietary exclusive in contractual terms, in the real world, it becomes more than you think, because the Netflixs and the Hulus and the Amazons of the world, or the HBOs, they're moving into big time general entertainment, so it's big studio fair, it's their own original programming. There's a lot of the content that we license that is not found even though people could license it because the way the industry is developing, that's why these niche channel opportunities exist. And so a big part of the value proposition is a combination of the original programming or proprietary content as Chris described, with the curation, the access, the social community that goes for this avid audience. So it is a somewhat different model than why you choose Netflix versus Amazon prime versus Hulu, but I think that's a distinction that's important to keep in mind.

[Christopher J. McGurk:]

Yes. And I think the word exclusive, you got to look at that hard and fast. Because for instance, the AIP universe production deal that I talked about, we talked about having an exclusive window on ConTV, that window might only be a couple of weeks. But that's really important because as you look at the viewing behavior and the buying behavior of these millennials, what's really important to them is to get access to content first, and that might just be 24 hours before their friends get to see it. And that's something that we're going to try to take advantage of with our programming strategy in all of our channels.

[Operator:]

The next question is from Andrew D'Silva of Merriman Capital.

[Andrew D'Silva:]

Just got a few questions. My first one is on ad inventory. How are things looking right now for ConTV? Are you finding advertisers are eager to partner? And are you still getting CPMs over that $15 a channel rate?

[Adam M. Mizel:]

Well, we will -- yes, in general, until we launch ConTV, then we start placing ad, all the ads. I'd say we have a lot of ad partners lined up both in some of the networks and our own proprietary sales force, so that we feel very good about the inventory that is going to be sold upon launch. And yes, we're seeing CPMs at or above the level you mentioned in terms of our sort of contractual or expected rates. And once it launches, we'll start selling -- seeing that roll in.

[Andrew D'Silva:]

Could you give us a sense of maybe some of the advertisers that are scheduled to distribute across the platform for the AVOD model?

[Adam M. Mizel:]

It's going to be a combination of who the networks place, so you're going to see the same kinds of people you'd see on a lot of online services, car companies, fast food, but we're also working with some of the entertainment companies who are promoting large movies that fit that fan base. We have a lot of conversations with some of the big studios who want to access that ConTV fan base, just like they go down to San Diego for their big summer movies. So I think where we end up with sort of a unique element is in that type of area, where you are able to bring to that fan base content and other information that's particularly relevant to them. That kind of general advertisers you'd expect to see online.

[Andrew D'Silva:]

Okay. Got it. And then could you let us know what your gross billings were for the quarter? And then what were CEG sales in the quarter, it's not broken out in your press release, although will be in your Q?

[Jeffrey S. Edell:]

Well, the CEG sales, Andrew, we just -- let's just see here -- well, you will see that in the Q, and the Q comes out in probably in the next couple of hours. And I can go over that with you, separately, let me just see if I can see it.

[Andrew D'Silva:]

If it's coming out today, it's not a big deal. Sometimes you post it the next day, that's all -- the reason I asked.

[Jeffrey S. Edell:]

No, we are literally posting in 2 hours and you'll have all the details for you then we can go over it.

[Andrew D'Silva:]

Okay. And then do you really have any information on gross billings in there or is that going to be excluded?

[Christopher J. McGurk:]

No, but we can get you that later.

[Andrew D'Silva:]

Okay. And then on previous calls you mentioned you had a pipeline of $50 million in gross billings, I didn't hear you mention that earlier. Can you expand on what that consists of, if it's still at $50 million? And then if it's still there, I can elaborate on my question.

[Adam M. Mizel:]

Well, the answer is yes. We've talked about it in our very slate and coproduction deals 74 movies that we've over the next couple of years have contracted in that over the next couple of years totals a lot more than that.

[Andrew D'Silva:]

Okay. Good. And then is it -- as far as the type of content you're seeing in there, previously a lot of it was maybe commissioned-based titles or you don't really own the title. Are you seeing a larger percent of your overall pipeline consisting of owned titles and production deals? Or is it still pretty similar to how it was in the past?

[Adam M. Mizel:]

I think you'll see a shifting in balance we've done consciously with a combination of studio label deals like the shop factories and the NFLs and others where we are the distributor and we are earning a fee. When we have with these coproduction deals and certain other studios where we have license the content that's much more where we are the owner licensee or consolidating the GAAP revenue from all sources that's down to what we keep in that fee. That's the shift that we'll see in our business as we balance that over -- out over the next couple of years. And historically, our license and royalty business has been under 20% of our total revenues. It's going to grow over the next 12 to 18 months to a much bigger percentage [indiscernible] new content that we're bringing on [indiscernible]

[Christopher J. McGurk:]

And Andrew, you'll see the 3 months ended for the quarter for the consolidated revenue -- just pulled up the Q for you, $16,164,000 will be the piece of consolidated revenue.

[Operator:]

And the next question is from Tristan Thomas of Sidoti & Company.

[Tristan Thomas:]

I just had 2 questions. First one just regarding how you're promoting ConTV. You really have a captive audience at the Comic Con events. How are you really going to get Dove and your new channel BRIGHT kind of out in front in your target audience?

[Adam M. Mizel:]

Well, I think in each case we think they're interesting captive audiences. In the Dove case, we are working with a lot of family, friendly, faith and Christian groups, who have deep audiences, who are subscribers of Dove content and product to market through to their customer bases and we've had huge interest and huge support, not because of the power and the credibility of the Dove brand. And so will be a different way of penetrating those customer bases, they're not going to Con, but they're going to all kinds of meetings, they're part of groups, there's a whole set of mailing lists where both from a physical and then virtual perspective, they're sharing information and accessing content and accessing like-minded communities. So we actually see a very deep path there. On the BRIGHT side, and kind of what we alluded to it in our remarks, what's interesting there, is that the team we've partnered with has deep history relationships in the cable space and MSO space and we're looking with them in how we bundle a channel into nonlinear over-the-top applications from other distributors as well as directly over the top to a customer base, but we're going to be effectively looking at that in partnership with some interesting cable opportunities and what we like about it is it may open some new channels for us, for the Doves and the con TVs in an area that we haven't historically played in.

[Tristan Thomas:]

Okay. And just one final question. I apologize, if maybe you touched on this. Can you get a little more in depth regarding the difference between creating a TV channel with TV4 as opposed to something like Comic Con still more of a oneoff?

[Adam M. Mizel:]

Sure. I mean I think the simplest way which is interesting about TV4 is they have a very different strategy than we do, which is they're launching a large number of smaller channels and in essence, seeing which ones start to grow a little more. So my metaphor, in a positive way, I think they're an interesting sort of almost fun system, where we're trying ideas with them, with our content and library that it will be utilized in other ways. And we see a couple of them really start to work out, we then can bring a lot more muscle both in terms of content, in terms of distribution and access to grow it more quickly. So that's the idea with that one.

[Tristan Thomas:]

Okay. Any possible numbers in terms of how many that they do launch call it a year, or how many are they potentially involved in or a little too early in the process?

[Christopher J. McGurk:]

Well, we're going to launch one with them definitely this summer. We would hope on the upside, depending upon how that goes, that we could have as many as 5 channels with them in the next 18 months.

[Operator:]

[Operator Instructions] And the next question is Jee Bria [ph] of Jabre Capital.

[Unknown Analyst:]

A couple questions. On the base distribution business for the quarter, can you break out what the split was on the physical versus digital side of the CEG revenues?

[Jeffrey S. Edell:]

We could do that, but we don't put that out there publicly. So we report the number consolidated. Sorry, can't help you with that.

[Unknown Analyst:]

Okay. Not a problem. On Docurama, congratulations on the 300,000 number. It seems like you had a little acceleration in terms of weekly downloads, 7,500 last quarter, you reported now 8,000. Has it changed in terms of where those new downloads are coming from? Is it still predominantly Roku or is iOS making a more meaningful contribution at this point?

[Adam M. Mizel:]

Roku is still by far the largest, we work with them on a Thanksgiving promotion that went on for couple of weeks and they drove a lot of application installs. I think you'll see a more Roku and more some of the other platforms as we ramp up ConTV because we create different marketing partnerships with each of the different platforms around our channels and I think that's one of the synergies we bring as we launch more of these is that we have sort of more relationship leverage credibility, whether it's Roku or iOS or Samsung or xBox and we create some interesting marketing partnerships together to promote more than one channel. So -- and really on Docurama, we see us make taking that to the next level sometime later this year behind the next couple of launches, because I think that would give us a lot more ability to push it forward.

[Unknown Analyst:]

So you don't think you'd be able to do this on a standalone basis on your own, given that you've already hit 300,000 with no other partner, so a de minimis marketing, you feel like you need a branded partner to really drive it the next level? Or do you think that's something you may be able to do on your own?

[Adam M. Mizel:]

Maybe. We haven't -- I think we would like to have a branded partner because I think that brings a combination not just a brand new customer base but additional content. They can continue to drive it, because -- but we'll see. I mean I think really a lot of our focus right now is making the ConTV launch in a couple of weeks success -- really successful, following that up quickly with the Dove launch to make it successful. And then from that, we'll have a lot more information to better answer the question you are raising. I mean it's a very quickly moving dynamic market place.

[Unknown Analyst:]

Okay. All right, that's fair. Can you comment at all on just user engagement, over 300,000 downloads? Can you discuss at all the user engagement, how often these people are opening the app and whatnot? So out of the 300,000, how many are really active?

[Adam M. Mizel:]

It's hard to tell. And our backend system provider is upgrading their analytics. I mean, we've generally expected somewhere between 20% and 30% of an active user base. So that's kind of what we've seem to be able to intuit, we look at page views and we look at viewing metrics, but it's not super easy for us to tell given the transparency we have today.

[Unknown Analyst:]

Okay. And the last question, I'll handoff to the time here. Are you going to be on the ground for the Chicago Fan Fest, that early March, after the launch?

[Adam M. Mizel:]

Yes. There'll be some people there. That is a -- that's not a full Comic Con. It's a new thing Wizard World is trying. We won't be as aggressive at that one versus the traditional Comic Con. But yes, we will be there marketing. I'll come on by, I won't be there, but come on by and sign up.

[Christopher J. McGurk:]

Hoping that you will sign up. Hopefully, you'll have a subscription before then.

[Adam M. Mizel:]

And come in costume. When you could be on cosplay, you can be on the channel.

[Operator:]

[Operator Instructions] There are no further questions at this time. I'll turn the call back over for closing remarks.

[Christopher J. McGurk:]

Okay. This is Chris. I just want to say on behalf of Jeff, Jill, Adam and myself and the whole Cinedigm management team, we just want to thank you for your continued support and interest in the company, and we look forward to talking to you very soon. Thank you, all.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.